Starting Your Own Business with Erica Douglass » Marketinghttp://www.erica.biz
Erica Douglass, "temporarily retired" after selling a successful business at age 26, writes thought-provoking blog entries challenging you to change your life and daring you to become more successful.Thu, 19 Feb 2015 17:57:55 +0000en-UShourly1http://wordpress.org/?v=4.1.1How to Find the Perfect New Business Ideahttp://www.erica.biz/2013/new-business-ideas/?utm_source=rss&utm_medium=rss&utm_campaign=new-business-ideas
http://www.erica.biz/2013/new-business-ideas/#commentsWed, 08 May 2013 17:37:55 +0000http://www.erica.biz/?p=4196Starting a new business, but stuck on finding the perfect idea? I hear you. In fact, you’re not alone. Recently, I asked people who opted-in for more information on my upcoming “Art of Email” course what they needed most in their businesses. Although many people said “Customers!”, several people asked how they would go about […]

]]> Starting a new business, but stuck on finding the perfect idea? I hear you. In fact, you’re not alone.

Recently, I asked people who opted-in for more information on my upcoming “Art of Email” course what they needed most in their businesses. Although many people said “Customers!”, several people asked how they would go about finding the perfect new business idea.

Let’s talk about that. I know the phase you’re in when you’re stuck on the idea. You want to start a business. It pays better (maybe!), offers more flexible time by allowing you to set your own hours, and gets you out from under the thumb of a boss. Plus, it’d be awesome to work for yourself and get people to sign up for something you’re doing for them.

The problem is making the leap from where you are now to actually having a successful business. In this post, we’ll work together on the first few steps to get you to the point of building your new business’s foundation.

First, to have a business, you need two clearly-identified items:

A market…

And a validated pain point within that market. (Key word here is validated.)

Finding A Market For Your Business

Let’s address finding a market first.

A market is a subset of people who are willing to fork over money for your product. The more clearly-defined and specific your market is, the easier it’s going to be to sell your product.

Good examples of markets:
Accountants in Boise, ID (ideally with an idea that you can expand to accountants in other locations later)
People diagnosed with Celiac disease in the past 7 days
People who know Javascript programming and who want to learn Ruby programming

Notice here that I’ve stepped away from the vague “small business owners” or “moms with kids age 3-5″ types of markets. Though those are markets for large companies that sell huge amounts of products, you need a tightly-focused niche market to start your product with. (Later, as your business grows, you can expand what you offer. But for now, keep it tight.)

Now, to pair with your niche market, you need a validated pain point that people in that market are experiencing. When I say “validated”, what I mean is that you’ve talked to multiple people in that specific market and you know that it is a pain point that they are willing to pay to solve.

For instance, I was in the market of “People diagnosed with Celiac disease in the past 7 days” back in 2009. (I even wrote a blog post about it.) If you’ve ever had a diagnosis that’s life-changing, as this one is (you can never eat wheat or foods with gluten in them again–I didn’t even know what “gluten” was!), you’re in a huge world of hurt and pain. (In my case, I was literally in pain.) And you’re willing to spend money to make that pain go away.

Within the first week of being diagnosed, I’d already bought two books on Celiac disease/gluten intolerance. I’d also turned my pantry upside down, chucking a whole trash can’s worth of food with wheat in it and spending $200+ on new groceries that I had identified as gluten-free. I spent time madly doing research, trying to figure out if the soy sauce and Worcestershire sauce that I had was gluten-free, or if ingredients like “maltodextrin” had gluten in them (in the U.S., maltodextrin is made from corn and is gluten-free.)

That pain point of “first diagnosis” is when you will try anything to get help, and money suddenly becomes less relevant. That’s a perfect market to sell to!

The “Emotion Test”: How Painful is The Problem You’re Solving?

When you’re speaking with potential customers about your product (or even just speaking with them frankly, trying to understand their problems), and they start to get emotional, that’s when you know you may have a good new business idea on hand. Can you help solve that pain point that’s making them emotional? The one that may have them literally in pain (as it was in my case?) That’s your market.

But what if you don’t have any idea what to sell? Then I recommend starting with a market and talking to them–getting them to speak frankly about their problems. Let’s face it–everyone loves to talk about their problems! Some of those problems you can solve, and some of them you can’t, but at least you’ll know what’s bugging people out there.

For instance, my personal trainer here in Austin, Jake, loves to complain about the billing software he uses. He hates it and wants to light it on fire! And whenever he posts about it on Facebook, other personal trainer friends of his chime in, agreeing. There’s a lucrative market out there for someone who wants to address that problem and build better billing and scheduling software for personal trainers.

The lady who owns the salon I go to has a problem where she can’t accurately measure the amount of hair color her stylists use on clients. Clients with longer hair need more hair color, so she can guess, but guesses aren’t always accurate. She needs a system where she can measure the amount of hair color used every time, accurately, and bill her stylists and their clients appropriately.

And her husband owns a BBQ restaurant where they hire someone to man the smoker overnight and make sure the temperature of their brisket remains constant so they can serve food early in the morning after smoking it for 12 hours–except that someone fell asleep one night manning the brisket, and there weren’t any alarms that went off. The brisket overcooked and not only did they have nothing to serve the next day, making them look bad in front of customers, but they lost hundreds of dollars in brisket that they had bought to serve that day. They need a temperature logging device–and now my fiance is working on a side project to build one for them and other BBQ shop owners.

In each of these examples, we see a business owner who is desperately in need of a product that will help them either save money and/or make more money. And these are just a few ideas. Make room for some local small business owners in your friend circle, or go to some local meetups, and put your ear to the ground. You’ll quickly hear what problems they have. From there, it’s up to you to decide if solving those problems is a market you’d be interested in pursuing.

The good news is that as soon as you do have a prototype, since you’ve validated the market up front, it won’t be an uphill battle to get your first few customers. You can just call them up or email them–they’ll be waiting for you with credit cards in hand!

—

In my upcoming “Art of Email” course, I’m going to show you how you can get customers (or get feedback from potential customers) without leaving your seat. In other words, no more cold-calling, knocking on doors, or having to figure out where business owners hang out–you can drop a few emails, even to people you don’t know, and get them to open up and respond.

And if you don’t know what idea you want to pursue, I’m including a series of videos on how to choose the right business idea and validate that with real potential customers.

In short, if you want to grow your business or start a business, “Art of Email” is where you’ll want to be. Make sure to opt-in to the extra-awesome email list below (it’s a different list than my primary email list) to be the first to know when “Art of Email” launches. I’ll also be offering some special bonuses just to the people on that list.

]]>http://www.erica.biz/2013/new-business-ideas/feed/10The “Macklemore Effect”: How to Rocket to The Top of Any Industry–Even If You’re a Nobody Right Nowhttp://www.erica.biz/2013/macklemore-effect/?utm_source=rss&utm_medium=rss&utm_campaign=macklemore-effect
http://www.erica.biz/2013/macklemore-effect/#commentsTue, 16 Apr 2013 20:35:34 +0000http://www.erica.biz/?p=4190Years ago, when I lived in Silicon Valley, there was a core group of about 50 people–the “cool kids”–who would make or break any social application that came about. Even though it often seemed, back in those days, that Twitter was down more often than it was up, the “cool kids” persisted in their use […]

]]> Years ago, when I lived in Silicon Valley, there was a core group of about 50 people–the “cool kids”–who would make or break any social application that came about. Even though it often seemed, back in those days, that Twitter was down more often than it was up, the “cool kids” persisted in their use of it, and so it grew. Twitter’s founding team befriended and embraced the “cool kids” and success ensued.

Twitter was successful on a small scale until 2009, when Oprah joined it and Ashton Kutcher became the first person to get 1 million followers. The “cool kids” had started the revolution, but Oprah marked the day when Twitter became mainstream.

Over the years, the core group of “cool kids” slowly fragmented. Some of the influencers, like Robert Scoble, went on to grow huge networks of their own. (Scoble currently has 325,049 followers on Twitter and nearly half a million followers on Facebook.) Others returned to running startups, blogging, or even working a day job, much as they had done before. The “cool kids” didn’t as heavily influence Facebook’s rise to the top of social media, and they barely registered a blip as Pinterest pulled in record-breaking amounts of obsessed followers.

Many startups today try to implement that same model of getting Silicon Valley’s “digerati” to pay attention to their app/website/new social media network/whatever. The founders are convinced that if only Robert Scoble will do a video of their new company, or if TechCrunch will write an article about their latest round of funding, that they, too, will be successful. They see the outside results of something like Twitter, without understanding the view from inside the Valley–and how much things have changed over the past few years.

Are the “Cool Kids” Really the Ticket to Success?

You see, the influencers aren’t all in one place any more. It used to be that most of the tech press was in Silicon Valley, and that “core” of cool kids all hung out together at private San Francisco shindigs and swapped stories about the latest social media find. Back when no one knew what social media was, that was great. And so, back then, it was easier–if your app or company attracted the cool kids, you were in. And if it didn’t, scrap what you were doing and try again.

Most startups and businesses jump right in to the top celebrities–the “cool kids”–in their industry, figuring that if those celebrities endorse their product, they’ve got it made. In rare cases, that does happen. But what’s more powerful is building a powerful product that pleases a small subset of people, and working out from there. Let’s call it the “Macklemore effect.”

In case you don’t know who Macklemore is, he’s the guy who sings the popular song “Thrift Shop.” He seemingly came out of nowhere, an independent artist whose latest album is now at the top of the charts.

But if you read deeper into his background, you’ll find out he’s been performing since 2000. His releases have been spotty, owing to an on-and-off drug addiction. But his music is addictive. He describes it this way in an interview with the Seattle Times:

“‘These days, there’s two different ways bands blow up,’ or get big, he says. ‘One of those, is they make a piece of work that the critics jump on right away … and that takes it to the next level very quickly.’

‘And then there’s another way, which is organically, spreading amongst the youth. To the point where those tastemakers can’t help but notice, ‘Hey, he’s selling out shows all over the place. Something’s happening here.'”

That interview, by the way, was published in 2011–before most of us knew who he was.

The “American Idol” Way

The first way is “American Idol.” And it’s what startups and business owners hope for. It is, in fact, the middle-class dream: To get “noticed”; to get a “big break”–to build something successful without having to do much work. Just sing your little heart out, and hope Simon Cowell or your industry’s biggest “cool kid” will pick you up for a contract.

Unfortunately, as many “Idol” contestants will testify, it also means you don’t have full control over your destiny.

The Macklemore Way

So what’s the other way? First, make something good. Really good. You’ll know you have it when people are spreading the word about your business–encouraging others to use your product without you having to do much marketing.

Then, focus on finding the smaller influencers in your niche. Twitter knew who they were in the Valley–before the Valley was big. They’re the people who write blogs about your market and who have a core group of people to whom they recommend products they love. Show them your product, and get them to fall in love with it. Then help them spread the word. (If your product is innovative and interesting, they’ll be happy to do so!)

There are some tricks, though. First, you have to know who in your niche is the right person to contact. Then, you have to get that person interested–tough, in a land where many non-famous folks receive hundreds of emails or messages a day!

And then, you have to get that person to take some action. Do you want a meeting? Do you want him or her to try out your product? To get results, you’ll need to ask for the specific thing you want from that person, and make sure he/she follows through.

How do you do all of that? I’d like to show you.

I’m producing a course called “Art of Email.” It’s all about how to reach the tastemakers in your niche. In the course, I’ll show you (with step-by-step templates) how to get publicity, press, investors, customers, and more–all by sending a few well-crafted emails.

I’ll even show you how to find any celebrity’s email address (I’ll give you Mark Cuban’s email address as an example.)

Want to be the first one to check out “Art of Email”–and get some additional freebies as well, just for being the first one to take it for a test drive? Put in your best email address in the box below and you’ll be the first to know when I launch it:

(Note: If you’re already subscribed to my email list, this is a different email list, so please make sure to add your email address here so you are the first to know when I launch and you get all the cool free stuff as well!)

]]>http://www.erica.biz/2013/macklemore-effect/feed/9How to Build a Billion-Dollar Businesshttp://www.erica.biz/2013/how-to-build-a-billion-dollar-business/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-build-a-billion-dollar-business
http://www.erica.biz/2013/how-to-build-a-billion-dollar-business/#commentsMon, 18 Mar 2013 21:14:44 +0000http://www.erica.biz/?p=4180There are lots of posts online about how to make your first dollar, or even how to grow a modest side business. But there’s precious little information on how to build a billion-dollar company. Before we get into the how, though, there’s something I want to address–and that’s why. Why would you want to build […]

]]> There are lots of posts online about how to make your first dollar, or even how to grow a modest side business. But there’s precious little information on how to build a billion-dollar company.

Before we get into the how, though, there’s something I want to address–and that’s why. Why would you want to build a billion-dollar business?

Even if you have decided you don’t want to build a business that large, I encourage you to read this anyway…it may very well change your perspective on how large you want your business to be.

Pushing Through the FUD

There’s a lot of FUD (fear, uncertainty, and doubt) around building large businesses. In particular, news media loves to hate on “workaholics”–people who seem consumed by their work. Reporters dish on divorces or family fallouts stemming from overworked parents or people who just can’t seem to disconnect from their smartphones.

So, the logical choice, if building a huge business causes you to be overworked and potentially lose your family, is to start a smaller business, right? One where you can work on the side to begin with and not over-tax yourself. One where you can still see your family. One where you don’t kill yourself for your business. It seems like a utopian ideal. But is it really possible?

When you build a business on your own (no financial help, no partners, and nothing but your own time), it can cause enormous strain on your personal life. Suddenly, with no boundaries on when and where to work, you find yourself in a constant state of “I haven’t done enough” and “I should do more.” You start working more, but you still don’t seem to be accomplishing much. Without a partner or mentor to help you, you can sink pretty deeply into the trap of “busywork”–things that keep you busy, like updating Twitter or Facebook, but don’t move your business forward.

Is this the life you imagined? Is working so many extra hours a day, giving yourself backaches from sitting at the computer too long, and eating bad food–while always being on the edge about the next “beep” of your phone being an email from an unhappy customer–what you envisioned when you set out to build your business?

No? That’s what I suspected. If that’s where you find yourself right now–or it’s where you can see yourself if you continue down your current path–I have an unconventional remedy. It’s called thinking bigger.

Why Do So Many Small Businesses Fail?

There’s a gigantic disconnect in the world right now. Why, with an unprecedented amount of information on how to run a successful business online–everything from setting up websites to selecting the right shopping cart to getting traffic–are so many businesses still failing? It’s not for a lack of information on how to do it, that’s for sure.

No–the problem lies squarely with you, the business owner. This is a tough pill to swallow, but someone’s got to say it. And as someone who has also built businesses that struggled to make even enough money to pay myself, year after year, I’ve been where you are. Who better to be truthful than someone who’s been there?

One of the core problems is that you’re thinking too small.

Stuck in the trap of “A big business is too much work”, you’ve doomed yourself to running around, doing the jobs of 6 people while making the income of one person–or, truthfully, less than one person. Fear holds you back from growing your business larger, because while you’re doing the work of 6 people now, you can’t imagine growing your business larger. Growing it larger, after all, would mean you’d have to do more work. There’s no way you can put any more on your plate! It’s overflowing and bursting! Your family is already getting less time than they would otherwise. Growing the business may result in you getting a divorce!

It’s about this time that many business owners give up. “I could do better just getting a job,” they think. So they go back to working a day job, or consulting, or they scale the business down. That is, however, exactly the wrong decision.

Do You Know These Numbers?

It’s time to think strategically about growing your business. I see many new business owners who haven’t even mulled over the numbers. How many customers will it take to get you making enough money to comfortably live? What overhead do you have? Stop and think about these questions as they pertain to your business for a few minutes. If you can’t immediately snap your fingers and know how many customers you need in order to quit your day job and go into this full-time, that’s a problem.

And if you’re not sure what your overhead is (including telephone, computer, office space, etc.), you have an even larger problem. How do you expect to grow when you don’t even know what to do to get where you want to go? Your goal is to do this full-time…am I right? So what do you need to get there?

People who build successful businesses start from the outset with those numbers, and then work backwards. What’s the total market size? How many people search for those keywords every day on Google? How many people bought the best-selling book in that category? How many people can you reasonably expect to visit your website on a daily basis, and what percent of those do you expect to buy something? How much is your average order size? What percent of those orders go to overhead, and what is left over for you to take as profit?

These are the questions you have to ask yourself in order to transform your business from a side business to a profitable full-time venture.

Addressing Your Biggest Fear

I haven’t addressed your biggest fear, however. You’re already doing the jobs of at least 6 people. (Let’s count: Sales, marketing, support, admin work, tech/dev work, oh, yes, and you’re the CEO too!) If 1,000 orders suddenly came in, it’d be hard to keep up. Knowing that–consciously or subconsciously–you will predictably miss or blow opportunities to grow your business exponentially. After all, if growing your business is just going to put a bunch more work on your shoulders, why do it?

That’s why you’re better off building a structure for your business from day 1. Yes, on day 1 you’ll be wearing most or all of the hats. But what are those hats? And how many orders do you need per day (or how much revenue do you need per month) to hire someone for some of those tasks?

Even though your business is just you, right now, you still need an org chart. At the beginning it’ll be a whole lot of your name and no one else’s. But you’ll now have a clear path…at $x in revenue, I’ll be able to hire someone to do support for my business. Great! I don’t want to do support, so that’s motivating for me. (Replace with whatever you hate most about your business…support, tech/dev work, website maintenance…) It’s time to get some sales so you can hire this amazing person who will make your website shine. And you’re going to hire that person with profit. (That’s a fulfilling feeling–to hire someone with the money you’re making from your business!)

Now you’re starting to see the difference between where you were a week ago and where you are right now. Last week, you did not have a plan. You drifted aimlessly. You didn’t know what to do next. That is why you were Tweeting instead of making sales. Now you know what to do: Build your org chart. Put yourself in every position. Then find the position you like least. How much revenue or how many orders will it take for you to be able to hire that out? There’s your next goal.

Overcoming Your Fears

Ah, a billion dollars. It seems almost unfathomable! How the heck do you build a billion-dollar business? Most billion-dollar companies start out strategically, like the plan I’ve outlined above. It starts with a plan–but it also starts with acknowledging that this will be an extremely personal journey.

When you commit to building a billion-dollar business, you’re committing to change the world. A billion-dollar business will have, at a minimum, thousands of customers (I’ll address exactly how many below.) To do this, you have to be ready to break through all your personal fears and inhibitions.

I started on that journey at age 18–to break through my fears. By age 24, I was determined to build and sell a business for $1 million–a sum that seemed so huge to my young eyes. To someone who had never been paid more than $49,500 a year in a salary (that’s the salary I had when I quit my job in 2001), a million dollars was a paradise.

I completed that goal in 2007. So what’s next? I want to build a billion-dollar company. Why? Because that’s the impact I want to have on the world. I love building businesses. So why not build one that will employ hundreds of deserving people and serve thousands (or tens of thousands) of customers better than any solution on the market will serve them today? Absolutely. That’s why I’m here.

I know that “what is within is without”, and vice versa. That means that I have to be clear with who I am and what I want on the inside. It means I have to stare fear in the face and go build a business anyway. For me, this also means being radically transparent, acknowledging my mistakes, and moving forward regardless (as I did when I wrote about my earlier mistake in almost throwing away this blog.)

As a million dollars seemed so far away to me 10 years ago, a billion dollars does today. But as I quashed my lingering doubts about building a $1 million dollar business in my 20s, I will quash my doubts about building a billion-dollar business in my 30s. (I’ve been focusing hard on personal development over the past five years, and as a result, have surprisingly few personal doubts left.)

What Does It Take To Get To $1 Billion?

Jason Cohen and I had a great conversation about what it takes to get to a billion-dollar valuation. Software companies, for instance, are typically valued at 5-8x their annual revenue. Assuming a conservative valuation of 5x annual revenue, I’ve created the chart below, which shows how many monthly recurring customers you need to obtain a valuation of $1 billion:

The first thing my team and I noticed when we built this is how, if you charge your customers more money per month, you need far fewer customers to hit the magic $1 billion valuation. You only need 2,000 customers paying you $10,000/month each to get to $240 million in annual revenue–and believe me when I say there are plenty of large companies paying this much for all kinds of software. (Here’s a hint: Every time they don’t have to hire 1 full-time person, and can use your solution instead, they’ll pay those rates.)

At $99/month, though, you need two hundred thousand customers paying you to hit over $200 million a year in annual revenue. 200,000 customers! Now you’re looking at a significant portion of all website owners, for instance, or a huge number of small businesses. You’re also looking at a significant amount of overhead to find, sell to, and support those customers.

What we took out of this: Raise your prices. Find out what problems huge companies need to solve and market directly to them. That’s exactly where we are heading with Whoosh Traffic. (I’ll show you how to do that in another blog post.)

Your Action Items

Let’s wrap this up with a few action items:

Know how big you want to grow your business, and what it will take to get there. Even if you don’t want to grow your business to a billion dollars, you need a plan. Wearing all the hats is a sure path to burnout. If you don’t have a plan for generating enough revenue to start hiring and/or outsourcing, stop now and write one. Go back through the questions I asked in this post and make sure you know the answers.

Building a billion-dollar business may be easier than (or about the same amount of work as) muddling along and trying to “just make enough money to survive.” It does require you to stare yourself in the face and get through your own fears, though. It will only kill your relationship with your family if you let it.

If you know in your heart that growing a business is the thing you want to do–if you live and breathe growing businesses–then I encourage you to set really big goals. Build a billion-dollar business? Sure, why not? There’s nothing more fun than going all-in on the thing you love most.

How do you plan to implement this strategy? Let me know via a comment below how you are taking action.

]]>http://www.erica.biz/2013/how-to-build-a-billion-dollar-business/feed/16Are You an Entrepreneur–Or a “Wantrepreneur”? Find Out…http://www.erica.biz/2012/wantrepreneur/?utm_source=rss&utm_medium=rss&utm_campaign=wantrepreneur
http://www.erica.biz/2012/wantrepreneur/#commentsThu, 20 Dec 2012 23:37:52 +0000http://www.erica.biz/?p=4162There are a lot of people running around these days calling themselves “entrepreneurs”. However, I’ve discovered a few fool-proof ways to quickly see the differences between successful entrepreneurs and wantrepreneurs–or people who want to start a business, but who actually aren’t going to take action and create a real business. Here are five traits I’ve […]

]]>There are a lot of people running around these days calling themselves “entrepreneurs”. However, I’ve discovered a few fool-proof ways to quickly see the differences between successful entrepreneurs and wantrepreneurs–or people who want to start a business, but who actually aren’t going to take action and create a real business.

Here are five traits I’ve noticed in startup founders and entrepreneurs that don’t exist in “wantrepreneurs”:

1. A willingness to learn anything.

I hear this all the time: “If only I had a developer…” You’re never going to be successful if you externalize what’s wrong (I can’t hire a developer because I don’t have any money/no one will give me money, and therefore I can’t start or build my product.) It’s a poor attitude.

When I hear someone say this, my first question is: “Have you built a prototype?” Surprisingly, 90% of the time, the answer is no. Even great developers aren’t mind-readers. They need a “spec”–a detailed document of what you expect to accomplish with your product. If you need someone else to come up with that, you’re going to have to dig deeper and examine your own feelings about why you feel you’re not worthy to do that. As a founder, you have to be the one championing the direction of the product.

If you have a paper prototype, your next step is to hire someone to build it. Right? WRONG. Your next step is to build it. Sit down with a book or take a class on HTML and CSS, and build out a demo version of your product. Is it ugly? Doesn’t matter–if it’s useful to others, they’ll buy it, or at the very least, express interest in buying it.

At this point, you may get an uneasy look on your face. Isn’t it better to hire someone who knows what they’re doing? In the future, yes. Right now, though, you don’t even know how to tell whether someone knows what they’re doing or not. Plus, without a spec or prototype, you’re going to spend a whole lot of extra money and time having someone else do it wrong over and over again (because again, even the best developer can’t read your mind.)

Once you understand how building a website works, you can dip your toes into code. Read up on the differences between Python, Ruby on Rails, and PHP. Pick one to learn. Spend a week learning the basics. Then spend the next couple of months hacking on weekends. This will help you figure out whether that developer you’re about to pay a fortune to actually knows what he or she is doing.

The point of this exercise is three-fold. One, it gets you familiar with how to articulate your vision to a developer. Two, since you have more time than money, it shows everyone (including prospective developers) that you’re serious and committed to this project. And finally, if you can get something up there, even if it’s just a sketch with buttons that don’t work, you can start showing it to prospective customers and asking them to commit to paying for it. (Note that I didn’t say “Asking them how much they would pay for it.” I said “Asking them to commit to paying for it.” There’s a huge difference. Only one path will show you whether your idea will actually be successful.)

2. Going above and beyond to build something that people want.

One of the biggest issues I see business owners get stuck on is checking their ego at the door. A common symptom of this is when I hear someone quote Henry Ford saying: “If I had asked people what they wanted, they would have said a faster horse.” In other words, you are the person who knows what everyone else wants, and once people see what you have to offer, they’ll immediately drop everything they’re doing now and do it your way instead.

Sometimes that’s a good quote–especially if you’ve been buried deep in your market for years, you have expert-level knowledge, and you have the prototype out and people are pulling out their credit cards and begging to buy your product even though your demo isn’t functional yet. If you have all that, though, you’re probably not the target of this article!

If you haven’t been in your market for years, and you have an idea for a product that requires the market–your potential customers–to think about things in a totally different way, that’s the most likely path to failure. Educating a market is incredibly expensive. You won’t be able to do it alone, especially with limited funds. (See New Coke.) Even if you really have invented a better mousetrap, if people are happy with their current mousetrap (or worse, don’t find value in paying to trap mice!), you’re going to have a tough path to success.

So what’s the better option? Finding out what’s in the market and what people hate about what’s out there. Then, instead of trying to “shock” them with something totally new, just incrementally improve on what’s out there.

You can make a million-dollar business by entering an incredibly competitive market and doing one thing better. With my last company, that was better customer support. Yep, that was it…the grand differentiator between my web hosting company and 20,000 others! It’s easy to over-think this stuff. Find one thing that sucks in your market, and start a company that fixes that gap.

3. Not knowing where your next dollar is coming from, but going forward anyway.

Startup founders and entrepreneurs are inherently scrappy folks. The people I hear who “pooh-pooh” consulting and “trading dollars for hours” are the ones most likely to fail on a project. If money gets tight, scrape together as much consulting work as you can and live as frugally as you can. Yeah, it’s not ideal to do consulting and try to run your own business, but you do what you have to do.

Ask yourself this: Do you believe in your startup idea so much that you’d be willing to sell your car and drive a beater for the next year in order to fund yourself for another month? If the answer is no, you need to decide: How committed are you to running your own business?

If you decide you enjoy your lifestyle the way it is and you’re really not interested in the crazy life of an entrepreneur, there’s nothing wrong with that–and don’t let anyone tell you otherwise. I have seen startup founders who sleep on their own couch and rent out all the bedrooms in their house on AirBNB so they don’t have to pay rent. I once sold my entire DVD collection (bought years earlier) just so I could buy myself a couple of meals. Sometimes that’s what it takes. Sometimes you can just get by with consulting for a while. But you need to be willing to make large sacrifices, and be okay with wild income swings and/or consulting to pay the bills, in order to start a company.

4. Being willing to launch and ship even when it’s not perfect.

This has been the hardest one for me. There’s always one more feature to build, or something that customers expect that you don’t have. Customers (or potential customers!) can even get emotional and/or upset that you don’t offer something they expect.

Part of the answer is about setting expectations. No, our product is not perfect. It’s software. It’s going to have bugs. We are a tiny team and we are doing the best we can. I can give you an ETA on that feature you need, but it’s likely going to be a week or two…or a month or more, if it’s something complex.

The other part of the answer is being willing to let go. So a customer signed up and then they hate your user interface. Or they need a feature you don’t have. This is a success story, not a failure. First of all, they signed up (even on a free trial), so they see value in your product. Secondly, now you know what customers need. See if you can extend their trial or give them a discount until you can get the feature built.

And if what they’re asking for is completely unrealistic and/or it would take your product in a direction you’re not interested in going, cut them loose. Your sanity is always worth more than the money. That’s a lesson that’s been extremely difficult, but ultimately, I feel a lot better about running a business by being able to say “Yes” when it’s deserved, and a blunt “No” when it’s just not realistic for us to build. “Do you do social media tracking?” “No.” “Any plans to offer that?” “Not at this time.” Ah, what a relief–having the freedom and courage to say “No”!

5. Clearly articulating your vision of the future…and getting people to believe it.

I notice in many “wantrepreneurs” a sort of allergy or aversion to anything that might be considered “selling.” Talk about your product and what it does? No thanks. Interviewing a potential employee? Let’s keep it focused on the numbers and benefits.

Ultimately, though, the best entrepreneurs and business owners are evangelists. They are passionate about their market. For instance, I run an analytics company. I will talk your ear off about the state of the web analytics market, how broken it is, and how my company is solving that problem. In fact, I told a friend the other day, in the middle of a breathless spiel of what we’re working on at Whoosh Traffic for 2013, “You got me going on my favorite subject.” I love talking about analytics. I’m passionate about it.

That’s what you have to do–to potential customers, current customers, your blog readers, your family (fortunately I have an amazing fiance who never seems to get tired of my obsessive rants about cohort analysis, conversion statistics, and client reporting!) If you have the presence to get other people excited, and sharing in your vision, you can do anything. Great employees will turn down other, more lucrative jobs to work with you. Customers will show up, because your passion will come through in your copywriting. And other blogs and news magazines will be more likely to feature you (see my Mixergy interview as a good example!)

Are You Cut Out to Be An Entrepreneur?

It’s a ridiculous roller coaster of emotions to start your own business. You’ll likely start out with one idea and iterate into a larger vision. You’ll have moments of total despair and frustration, where you wonder if you were crazy to even attempt this, and you’ll have insane highs where you feel like you’re on top of the world.

Being an entrepreneur is not for everyone. Is it for you? Only you can decide that. For me, the answer is clear: I wouldn’t have it any other way!

I encourage you to take action after you read this post. What are you going to do? Write out some startup ideas? Sketch out a prototype on paper? Learn HTML and CSS? Post your thoughts and goals in the comments!

]]>http://www.erica.biz/2012/wantrepreneur/feed/9Pricing Strategies: How to Price Your Product or Service–To Avoid Killing Your Businesshttp://www.erica.biz/2012/pricing-strategies/?utm_source=rss&utm_medium=rss&utm_campaign=pricing-strategies
http://www.erica.biz/2012/pricing-strategies/#commentsMon, 30 Jul 2012 03:03:06 +0000http://www.erica.biz/?p=4099“How do I price my product?” another entrepreneur recently asked to an email list I’m on. “I’ve looked at our competitors, and I know how much it costs to produce what we offer. I think I know what my audience will pay. So–looking at all of that–what’s the best pricing strategy?” Pricing questions are never […]

]]> “How do I price my product?” another entrepreneur recently asked to an email list I’m on. “I’ve looked at our competitors, and I know how much it costs to produce what we offer. I think I know what my audience will pay. So–looking at all of that–what’s the best pricing strategy?”

Pricing questions are never the easiest questions to answer, but having worked with a lot of business owners helping them grow their businesses, I have some suggestions.

Make Sure Your Market Pays

There are some markets out there that are famous for not paying. It’s not you–they just don’t have the money. Students are the best example. They’re cash-strapped and they usually have a fair amount of spare time on top of that. They’re a terrible market to try to sell to (no offense to any students reading this–I ate my fair share of fast food and used coupons for everything when I was a student, too!)

Hobbyists are another example of a quintessential “terrible market”. The whole point of a hobby is that you spend time doing something you enjoy. There are a few successful niches here (selling supplies for a hobby market is reasonably lucrative) but since it’s not integral to that person’s day-to-day life, hobby spending is going to be low on their priority list.

My personal favorite “terrible market” is one I’m definitely a part of: Geeks and nerds. We (and believe me, I include myself in this category) are so stingy that we’ll spend 8 hours building a computer and setting it up from scratch to save a few hundred bucks. Yep, been there, done that. If your target market is geeks, and you think you’re going to build a hugely successful product for that niche, just know that “Why should I pay you when I can build it myself?” is going to be a common objection. You’re going to have to quickly explain why your product is better than something they could cobble together themselves. Even then, you’re going to have a frustrating time, as many of them will choose to build it themselves anyway.

That advice applies equally to hardware and software, by the way. Geeks love to spend time building software. Similar to the hobbyist market, the most successful companies that cater to the geek market are going to be ones that geeks can build things on top of, like Heroku (a hosting service built for geeks, by geeks) or Github (a website that easily lets you share your software’s source code with others.) These services are so successful because they make it easier for geeks to share their creations with the world. You can also see success in the geek market with products that make it easier to build a project (think geek equivalents of hobby kits, both physical and software-related.)

The good news is that it’s likely that if you’re a part of these markets, and were thinking about selling to one of these markets, there’s probably a more lucrative market close by. There are some folks who want do-it-yourself instructions, but often there are far more people who would just like it done for them. There are lots of people who will buy $30 plans to create a bookshelf themselves, but on the other end of the spectrum, there are plenty of furniture stores selling metric tons of bookshelves to the mass market. Which market is bigger? Yep. Hobbyists and geeks seem deceptively simple to market to, but they’re tough buyers and often terrible customers (that last part probably describes me, too, sadly…I’m an incredibly loyal but also incredibly picky customer.)

Markets That Do Pay

Here’s a short list of markets that do pay. Certainly, there are companies that are successful outside of these markets. But these are the ones where it’s easier to find paying customers.

Consumers have a few times in their lives when they dish out lots of money. Moving, especially long-distance, is a huge expense. So is having a new baby (particularly a first child!) And getting married can be a huge financial layout. If I were to go into a business-to-consumer business, I’d want to focus it around one of these critical times in people’s lives, when they’re much less likely to sweat every penny, and much more likely to demand “only the best.”

Businesses: In general, the smaller the business, the harder it is to sell to. Businesses start hitting growing pains at 3 employees. Two employees is easy: Just pick up the phone or any chat service and call each other to work out an issue, or meet up at a coffee shop. With three people, communication suddenly becomes harder.

Businesses that are hiring are great to target. For one, you know they have some spare money. And when they’re hiring a third or fourth employee, they could use some serious help.

Large businesses are often harder to pin down initially, but they can become your best customers. You’ll have to deal with a longer sales cycle and likely 4-5 people (at least) who are making a decision. The book “Selling to VITO” can help you get into the door. Huge companies will not hesitate to write huge checks if they think you can help them. Just beware “feature creep”, or developing features only for one large company. Don’t get into a situation where a single customer leaving can cripple your business.

Pick What You’re Going to Charge, then Double It (With a Twist)

I always like to charge more than everyone else for the same thing. But with a twist: I liberally float coupons around. People love to feel like they’re getting a deal. I have seen, over and over again, customers choose a higher-priced service with a coupon over a lower-priced service that doesn’t have a coupon. The high price sets a perceived value that’s higher, and the coupon makes the sale.

Alternatively, you can run a sale (with a twist.) The most successful promotion I ever ran with my hosting company was for a shared hosting account normally priced at $80/month, but priced at $40/month for life if the customers agreed to fill out a survey and send feedback on how they liked the service. I’m pretty sure I never even got around to writing the survey and sending it out, but that was by far the best margins we’d ever had on a product. I hit on this success just from running promotion after promotion and seeing what worked.

Look at Which Pricing Strategies Are Working

I’m a huge advocate of signing up as a customer for all your competitors’ services. In fact, it’s something I believe so strongly in that I make a consistent effort to sign up as a paid customer of at least one competitor’s service each month as the CEO of Whoosh Traffic.

I’m not doing this for an ego boost–a “Look at how much better our product is!” (Although my co-founder and I did have a nice 2-hour bonding session recently over commiserating at how poor one of our competitors’ user interfaces was.) Certainly, while that can provide you and your team a morale boost, the most important thing is to look at what is working on your competitors’ products.

I first look at their website. What gets me to buy? Particularly if the competitor’s product or service is popular, something must be working. “They have a lower price” is a tempting point of comparison, but I can assure you, lowering your price doesn’t always work. Is it the testimonials on their site? Faces of their team? Customer case studies?

I’ll give you an example that was completely not obvious to me for months. We (Whoosh Traffic) have a product called a rank tracker. You sign up, enter your website and some keywords you are ranking for (or want to rank for) on Google, and we tell you every day where you’re ranking for those keywords in the search engines. We have a few hundred customers who love this service.

Finally I just started reading all the FAQs and documentation for our competition. At one point, combing through the FAQs of a top competitor for what seemed like the 20th time, something finally stood out.

Google stores 1000 results for every keyword–10 results per page (usually) x 100 pages deep. Our more expensive plans tracked all 1000 results, so if you were ranking #736 for “refrigerator reviews”, it tracked that and showed you.

Looking through competitor after competitor, I discovered something interesting: We were the only service that was doing that! Yet we didn’t have it as a feature on our website at all. We didn’t think twice about it–after all, to us, if Google offered 1000 results, we were going to track all 1000. But no one else had figured out how to scale to that level–most services only offered to track to result #100.

I realized there were two types of customers: Those who really wanted to track a few keywords deeply, and those who wanted to track a whole bunch of keywords but didn’t really care if they ranked #736 for anything. The second group was the larger group, but we weren’t catering to that group.

Once I discovered this, I took swift action. In less than a week, we radically revamped our website and pricing plans. Now our default pricing plans only track 100 results deep–but we offer to track a lot more keywords for the same price. (We also offer the 1000-deep pricing plans as an option–it’s just more expensive.) And we made the 1000-deep option a prominent feature with a starring role on our website.

Kudos started rolling in. Customer feedback became far more positive–our customers loved us! Our cancellation rate dropped. And all for something that I had initially completely overlooked…a feature that just seemed “obvious” to us. It was only by digging deep into our competitors’ sites that I finally figured it out.

The Biggest Mistake in Pricing

The biggest mistake you can make with your business is to delay–to procrastinate launching for fear of having the wrong price. The best thing you can do is to just launch and get actual, paying customer feedback.

As a current customer mentioned to us in a support ticket yesterday, “I can see quite a lot of tweaks and improvements going on, and it’s great to see you guys being responsive.” That’s the best feedback you can ask for from a customer.

If I can leave you with one final tip: When customers do cancel, ask them why. Sometimes it’s something you did and you totally screwed it up. In that case, the best you can do is apologize, take full blame, and wish them well. (We’ve all been there.) Sometimes, though, you’ll gain really good insights–things you didn’t make clear on your website, things that you didn’t make clear once they signed up, or ways you can improve your product or service.

Go forth, launch, and figure out things as you go. You will make mistakes. You will end up with at least one angry customer (it’s pretty much guaranteed, especially when you get at least 100 customers.) Launch, then every day, improve your business based on customer feedback–and you’ll build a happy, growing base of loyal customers.

Step-by-Step: Pricing Strategies That Work

Pick a market that will pay.

Analyze your competition and see what’s working and not working. Ideally, sign up for paid accounts (or at least free trials) of your competitors’ products.

Remember to calculate all costs, including a reasonable wage for your time, when pricing your product. (A common mistake is to value employee time, or your own time, at $0.)

Price higher, then use coupons or sales to help customers feel like they are getting a deal.

Launch quickly, then test and iterate. Listen carefully to feedback from customers who didn’t sign up, or who signed up but then cancelled.

Want to know where your site ranks on the search engines–and get an email every day notifying you of changes? Use coupon code WHOOSH to try out our rank tracker for 30 days–free. Click here for more details.

]]>http://www.erica.biz/2012/pricing-strategies/feed/23One (Common) Marketing Tactic That Can Ruin Your Business…http://www.erica.biz/2012/marketing-tactic-ruin-your-business/?utm_source=rss&utm_medium=rss&utm_campaign=marketing-tactic-ruin-your-business
http://www.erica.biz/2012/marketing-tactic-ruin-your-business/#commentsTue, 24 Jan 2012 23:48:43 +0000http://www.erica.biz/?p=3925Scott McNealy, former Sun Microsystems CEO, and Larry Ellison of Oracle announce a closer partnership in 2006, which led to Oracle acquiring Sun in 2009. There’s one (unfortunately common) marketing tactic out there that can actually take down your entire business. This is the true story of how I watched it unfold at a Fortune […]

]]>Scott McNealy, former Sun Microsystems CEO, and Larry Ellison of Oracle announce a closer partnership in 2006, which led to Oracle acquiring Sun in 2009. There’s one (unfortunately common) marketing tactic out there that can actually take down your entire business. This is the true story of how I watched it unfold at a Fortune 500 company…

Back in 2000, the company that I worked for, Cobalt Networks, was acquired by Sun Microsystems. I interviewed, and was accepted for, a position in Sun’s marketing department, working on Sun.com. As part of Sun’s marketing department, I got to see some of the advertisements Sun created to sell products to potential customers.

Sun’s potential customers were mainly large government agencies and giant corporations. These government agencies and corporations were used to buying products from IBM, Oracle, and the like. (Imagine a customer so large that your billion-dollar company is still considered a “startup”!)

The Tactic

Sun’s main tactic was to go negative in its advertising. One ad I remember them being so proud of (they actually photographed it in the San Francisco office I worked out of) was a shot of a man in a suit. He had dollar bills in his pockets, and the ad made it appear as if they were being “vacuumed” out of his pockets. The tagline was, essentially, “This is what IBM does to your company.”

The request for a negative campaign like this came straight from the top–from Scott McNealy, who was CEO at the time. Sun was negative toward everyone else in the industry. IBM? Hated ‘em. Microsoft? The devil! Apple? A joke! Oracle? Pfft!

At the same time I was working there, I was studying sales psychology. The books verified something I had already suspected: When you go negative in your advertising, the net effect is that the potential customer thinks more about the thing you’re being so negative about. (That explains why the “War on Drugs” actually increased usage of many drugs during its lifespan.)

I also made a friend in the sales department. Over lunch at In-N-Out Burger one day, he told me something interesting. He said, “I hear this over and over again–a large organization requests Sun, IBM, and others to make a presentation about their products. IBM is first. They show a great presentation about their product line. Then comes another vendor. They show up and do another fantastic presentation about how amazing their products are. Then it’s Sun’s turn. Sun does a presentation–about how awful everyone else’s products are!”

He continued, “The net effect is this. Most of these people have bought products from the company Sun’s presentation is bashing. So they get to thinking, ‘Well, IBM’s product isn’t as bad as Sun makes it out to be.’ And then, they go buy from IBM. We lose the sale, again and again and again.”

I was stunned. “Haven’t you taken this up with Sun’s management?” I asked. (Scott McNealy in particular practiced an “open door strategy” where he appeared to be responsive to suggestions.)

“Oh, yes,” he said. “But they don’t care. They like this sales strategy.”

Leading from the Ego

It was then that I realized two things: One, Sun was leading from an egotistical perspective of “we’re better than everyone else, and we’re going to prove it by bashing everyone else.” And it wasn’t making them many sales. Two, if they didn’t change, they weren’t going to survive as a company. Not only was the sales culture bad, but it created rot within the company as well. The company culture was oppressively negative, and it attracted people who enjoyed complaining and bashing others.

More importantly, though, I realized I had to take this to heart. When I ran my hosting company, I remembered this clearly. People loved to ask me, “Why are you better than [a competitor’s name]?”

In response, I would always ask who they were hosting with now. If it was the same competitor they just named, I was careful to not bash the competitor–because that would be bashing the choice that they made. Instead of indulging my ego, I said, “I completely understand why you’ve made the choice you have. You wanted a good deal.”

Then I would find out what had happened that made them want to change hosting providers. If they were just shopping around for a better deal, I’d tell them honestly that we probably weren’t the best fit. But if something had happened–they’d had an outage recently, or they needed room to grow–that’s when I’d be able to go into my preferred sales strategy, which was showing them why we were a much better choice for them. I’d point out our redundant power, have them meet our employees, and do a datacenter tour. By the end of the tour, 90% of the time, they were ready to sign up with us. Then I wouldn’t hesitate to collect their credit card information and get them set up!

Despite its questionable company culture, working at Sun taught me a valuable lesson. You can’t serve your customers effectively when you’re busy bashing your competitors. And you can’t survive as a business (or as an ideal) if your main issue is “We’re not this other thing.”

What are you saying to your customers? Are you presenting your business in the best possible light–or inadvertently turning your customers toward a potential competitor?

]]>http://www.erica.biz/2012/marketing-tactic-ruin-your-business/feed/27We Need to Wake Up–or Risk Pissing Off an Entire Generationhttp://www.erica.biz/2011/wake-up/?utm_source=rss&utm_medium=rss&utm_campaign=wake-up
http://www.erica.biz/2011/wake-up/#commentsThu, 16 Jun 2011 03:17:15 +0000http://www.erica.biz/?p=3763There is a complete disconnect between people ages 18-25 and the people who hire them (employers–that’s us!) This is a huge problem–one that we as employers need to recognize, and respect, before we lose an entire generation of young workers. What’s Wrong With Us? The young people’s discontent starts off early. Their parents and grandparents […]

]]> There is a complete disconnect between people ages 18-25 and the people who hire them (employers–that’s us!) This is a huge problem–one that we as employers need to recognize, and respect, before we lose an entire generation of young workers.

What’s Wrong With Us?

The young people’s discontent starts off early. Their parents and grandparents push this mantra: “Go to college, get a stable job, and then be happy.”

But they don’t see it the same way. The younger generation, by and large, doesn’t want to work for big companies. They want to travel, make their own way in life, etc. They’ve watched the Baby Boomers splurge relentlessly on consumer goods and bigger houses, and realized that it doesn’t make the boomers any happier.

Oh, sure, the kids are trend-aware and brand-conscious–perhaps the most brand-conscious of any generation we’ve seen. But they would rather have one $200 pair of jeans that they love and wear every day than 10 pairs of $20 jeans that don’t fit and look bad. That’s one of the differences between the younger generation and Baby Boomers.

Warning: Generation Y Is “Opting Out”

Brand-conscious though they may be, many of Generation Y are starting to “opt out” of the traditional life their parents envisioned for them. Embracing minimalism, they keep all their things in one backpack and go “couchsurfing”.

Many of Generation Y/Z have gone to college and have college degrees. They have also usually had one of those “stable jobs” that their parents so raved about–working for some big company or government organization where they were a meaningless cog in the wheel. And they gave it up after a short time.

The younger generation has embraced cell phones and laptops as two of their most prized possessions. Their goal? To make enough money to live on while they explore their dreams.

The problem, then, is the giant gulf between what these kids want and what employers have to offer.

What Generation Y Values

The employees of Generation Y and Z value freedom and mobility, and want to have a job that is meaningful. They are willing to work for very little–if that job is for a company whose goals and values they believe in, and their job will make a significant impact on that company.

The employers (Baby Boomers and Generation X), who themselves value stability and security, want to put Generation Y and Z into cubicles and have them do rote work.

And then we wonder why Generation Y and Z are dropping out of the workforce, and choosing to live on a couch for a year or work at a coffee shop instead of doing what we (employers) want them to do.

Both sides need to have a realistic sit-down and come to grips with this reality. If we don’t, we’re going to be faced with an entire generation that abhors “work”, and we employers will have to rely on an ever-shrinking (and more expensive!) pool of older workers.

What Can Both Employers and Employees Do?

As employers, here is what we need to do:

Figure out how to satisfy the largely mobile workforce that is Generation Y.

Rewrite our job descriptions to show that we care, that we as a company have a mission to change the world in some way, and that we value employees’ freedom.

Wake up and realize that a job at Starbucks is working for a large corporation, and that you might be far better off going out on your own, starting a startup, or working for a smaller company.

For graduates: Don’t shun your field entirely. Find a job that helps you utilize your degree, or start your own business in your field.

For Computer Science graduates specifically: Programming is fun! Find a company that values your contribution, and don’t write the whole computer industry off because you had a bad experience working for a huge company or government organization.

The Struggle Between Making a Difference and Making Money

I was born in 1981, and I straddle Generation X and Generation Y. I find I fit in more with the Generation Y way of doing things. I grew up in a large house with parents who weren’t always happy, and I have far less of an attachment to material things than my parents do. I would definitely rather have less stuff and love every item I own.

I’m content starting my own business, but also feel strongly that Generation Y needs to accept that revenue is directly correlated with the value that you give to the world. If you are a “life coach” with no clients who lets your spouse, parents, or other people pay your bills, are you really helping the world in any meaningful way?

If you refuse to get a job because you want to do something more amazing with your life, but then you move back in with your parents, are you really making a contribution to the world? The answer, in my mind, is a firm no.

Changing the world and making a profit don’t have to be at odds with each other. In fact, some of the people changing the world in the biggest way now are the ones who made huge profits and then used those profits to make a massive impact. (Look at the Gates foundation, and Warren Buffett.) Personally, I would rather become a billionaire and start a foundation that helps millions than become a life coach, struggle to find 2 clients, and barely be able to feed myself. I wish more people had this perspective on life. Sadly, many of us just don’t think big enough…

What Changes Can We Make?

Ultimately, I believe it is up to those of us who hire younger people to sculpt our job opportunities to their wishes–to allow more part-time employment; to open up our job positions and allow people to work from anywhere; and to make it clear that we are on a mission to improve the world in a significant way.

But it’s also up to younger people: to not give up on an entire industry because the big company they worked for previously was clueless; to be more open-minded about the types of jobs they accept; and to understand that it’s perfectly acceptable to make a huge profit and change the world–that, in fact, making a huge profit may enable them to change the world in even more significant ways.

We have the opportunity to close this gulf now and get some younger people back into the workforce and helping us to change the world. We just have to sculpt our message to clearly resonate with them. Let’s take a page out of our own marketing playbook and apply it to engaging Generation Y and Z.

]]>http://www.erica.biz/2011/wake-up/feed/94Are You Thinking Big Enough with Your Business?http://www.erica.biz/2011/thinking-big/?utm_source=rss&utm_medium=rss&utm_campaign=thinking-big
http://www.erica.biz/2011/thinking-big/#commentsFri, 08 Apr 2011 16:13:26 +0000http://www.erica.biz/?p=3677You’ve spent hours working on your business concept, and you’ve figured out something people will pay you for. Congratulations! Now, you may be inclined to jump head-first into creating a business. Lured by dreams of freedom and setting your own hours, you spend all of your free time researching a name and hammering out the […]

]]> You’ve spent hours working on your business concept, and you’ve figured out something people will pay you for. Congratulations!

Now, you may be inclined to jump head-first into creating a business. Lured by dreams of freedom and setting your own hours, you spend all of your free time researching a name and hammering out the details of getting people to your door.

But there’s a common problem that may trip you up and cause you to work long hours for low pay (not the most exciting prospect!) Here’s a good example of how that can happen, and what you can do to avoid this situation.

Recently, I had a chance to speak with Stephen Ou via email. He’s an up-and-coming entrepreneur who’s quite good at identifying problems others are having. He sent me an email asking whether I would use a new product he’s developing.

Stephen later posted an excellent blog post on his market research called “How I Got 38 Willing-to-Pay Customers Before Writing a Line of Code.” I love Stephen’s entrepreneurial spirit (especially considering he is only 16 years old!) But I noticed he has a thought process that is common with many talented first-time entrepreneurs: He’s not thinking big enough.

How many people can you serve, and how much will they pay? I see far too many entrepreneurs go after tiny markets and then charge too little to really make a difference. Follow this path, and you may end up working your buns off for a few hundred dollars a month in revenue…not a great place to be!

After reading Stephen’s blog post, I wrote him back and said:

“Cool, Stephen! I really like this. I just have one recommendation for you: Think bigger next time! You can use this same process to validate larger ideas. For instance, 10 people saying they are willing to pay for my new service, Whoosh Traffic, means a minimum of $1970/month in additional revenue for my business (and probably more.) So, how can you use this process for a product that will generate you thousands of dollars in revenue for each additional customer you bring to the table?”

Stephen wrote back with, “Great advice. It’s only my second time charging for a product–sometimes I always fear that when I charge too much, people will not see the value at the beginning. Therefore, it’s hard for it to go anywhere. Mind to share your thoughts on this?”

The Key to Your New Business: Breaking Down the Numbers

Let’s say you want to have a business that does a million dollars a year in revenue (a reasonable target–at this point, you will have employees, some work still on your hands, maybe a small office, and a pretty good salary.) Assuming you are charging $10 one-time, you need 100,000 customers a year–every year–to make that happen. That means you better be going after a market that a huge number of people are buying products in (office supplies, maybe, or cheap technology, or food.)

The problem is that many of those markets are commodity markets, where thousands of businesses are competing. The markets are crowded–you will need to find a real way to stand apart from the other companies selling similar goods. Plus you may need to support customers, and you won’t have much of a margin for that. What if other people want to sell your product as salespeople, affiliates, or distributors? You won’t have much room to pay them, and without incentives, they won’t be as motivated to sell for you. Most salespeople are not interested in selling a product for a $1 commission per product sold!

I’ve spoken about this to many entrepreneurs I see going down this path. And many will say, “But I don’t want a $1 million a year business.” If that’s you, that’s fine–but I do take a hard stance against going for a small market anyway. It’s not worth burning yourself out for less than minimum wage–an unfortunate position that many business owners are stuck in because they picked a market that just wasn’t that big.

My Criteria for Starting a Business

I have three major criteria that I look for when I start any new business:

1) The business must be something that I don’t have to explain to people–something that people easily understand. The value proposition for Whoosh Traffic, for instance, is compelling: Get more traffic to your website. That’s something that a huge proportion of businesses with websites need. It’s better to start off with a big market and then narrow it down than to start off with a small market filled with only a handful of people.

2) It’s something I can charge a lot of money for and have a relatively small customer base to be successful. When I sold my hosting company for $1.1 million, we only had 161 customers. But they were paying us an average of $425/month. That’s over $800,000/year in revenue from a small customer base. I didn’t need 80,000 customers to make that work (or 6,667 shared hosting customers paying us $10/month in revenue…can you imagine the support nightmare for that customer base?)

3) It’s scalable and systematizable. I don’t want to get into a situation where my expertise is the only “glue” holding my business together. I want any business I create to be sellable, and that means I have to create systems that other people I employ can follow, and gradually pull myself out of the business.

With Whoosh Traffic, our minimum service level is $197/month, and 55% of our customers opt for a more expensive package. Our average monthly revenue per customer (since we changed our pricing plans) is $365.73/month. That means we only need 228 customers to hit the $1 million mark. And our projections show us hitting 7 figures of annual revenue in under 2 years of being open.

Here’s an example of a known 7-figure business in Stephen’s niche: Premium WordPress themes. WooThemes, one of the most popular premium theme providers, now makes over $2 million/year–and their business meets the criteria I outlined above. (Note: The percentages in the above infographic are not accurate, as I couldn’t find real data on how many bloggers choose to opt for a premium WordPress theme. However, it does show the relative size of the markets in the WordPress arena.)

How Big is Your Market?

When picking out what type of business to start, seriously consider how big your market is. And instead of trying to create a market out of thin air, why not take a huge market, go for the high end of it, and pull a nice chunk out of it for yourself? Go where the money is, and sell something where there is clear, proven demand.

Also–I cannot recommend highly enough to sell a premium product and then deliver with amazing customer service. It is so much easier to support 10 customers than 10,000. And if 10 customers pays all your bills and allows you the freedom you desired when you started your business, do that. Find customers who do see the value in what you offer, and charge them appropriately. There are very few entrepreneurs who started out charging a lot and then regretted it–however, there are a lot of business owners who charge too little and now feel stuck with their businesses.

Charge more, find a way to take your business into the monthly sphere, and then overdeliver with amazing customer support, and you’ll hit your revenue and profit goals much more quickly!

Recommended Reading:

Artsy Editor. Stephen has been a great sport at letting me use him as an example for this blog post. If you’re tired of WordPress’s default editor and its cluttered feature set, check out his awesome new product, Artsy Editor.

How to Choose a Business. The story of how (and why) I chose web hosting as my first big business, and more criteria I look for when starting a business.

]]>http://www.erica.biz/2011/thinking-big/feed/63How to Be the Most Memorable Person in the Roomhttp://www.erica.biz/2011/be-memorable/?utm_source=rss&utm_medium=rss&utm_campaign=be-memorable
http://www.erica.biz/2011/be-memorable/#commentsFri, 18 Mar 2011 17:22:10 +0000http://www.erica.biz/?p=3654“I came to South by Southwest. In a kayak.” Tyler Tervooren and I were walking along the street toward my rental car to head out and grab the best chicken wings in town for lunch at South by Southwest. Tyler decided to stay in a hostel directly across the river from the Austin Convention Center. […]

Tyler Tervooren and I were walking along the street toward my rental car to head out and grab the best chicken wings in town for lunch at South by Southwest.

Tyler decided to stay in a hostel directly across the river from the Austin Convention Center. And although he took the bus from the hostel to the convention center every day, he told me he envisioned renting a kayak and simply kayaking across the river. “It’s a straight shot,” he said.

While Tyler saw kayaking across the river as an interesting story, I saw it as an example of something else: something I’ve recently been completely fascinated by. I call it the 100% verbal opt-in, and I’ve lately become obsessed with documenting this phenomenon.

While “opting in” in web lingo means having a person give you their email address to subscribe to your list, I consider a verbal opt-in to be when you pique someone’s interest enough with just one or two sentences that you get them to ask, “What do you mean?” or “Tell me more.” That acknowledgement is their way of “opting in” to your story.

Not only did I become fascinated by the introductions that made people verbally opt-in 100% of the time, I started noting them when I came across them. As we walked down the street, I explained verbal opt-ins to Tyler, and mentioned that his kayak story was a shining example of a 100% verbal opt-in. After hearing that he came to South by Southwest in a kayak, it would be hard to resist saying “A kayak?” or “What do you mean?”

Pattern Interrupts: The Key to Being Memorable

If you have studied NLP (neuro-linguistic programming), you will recognize this as an example of a pattern interrupt. That is, when people meet you, they expect you to say certain things. “Hi, I’m Tyler, and I’m a blogger,” is what they’d expect–it’s all about who you are and what you’re doing. (At least in America, we’re obsessed with the “What do you do?” question–and defining ourselves by our work.) But you can pattern interrupt easily by coming up with a creative story instead.

“Hi, I’m Tyler, and I came to South by Southwest in a kayak,” will not only pique their curiosity enough to get you the verbal opt-in, but it will make you instantly memorable. Here, in a room full of web designers, real estate agents, and social media douchebags, er, “experts”, you are unique. Different. Interesting.

If you hone your pitch to the point where you can get 100% verbal opt-in, you will find yourself quickly becoming, well, famous.

You see, however, there is a catch to all of this, and it’s why many of those other people who read this article will not attempt such a feat. Going for the 100% verbal opt-in means being different. It means having unique stories to tell, and it means living your life in a way that’s slightly off from the norm.

The Courage to Be Different

If you live your life as an insurance agent, for instance, it may require not only taking a vacation to a country most people would never visit, but actually re-crafting your story, so that when you introduce yourself, you’re no longer Bob the insurance agent, but Bob the guy who went to India and climbed the Himalayas in search of a mythical healer who lived in the mountains. (If you leave the story there, you’ve opened a loop that most people will find irresistible to ask you to close. “Well, did you find the healer? What happened?” 100% verbal opt-in. Like magic.)

If you go for the 100% verbal opt-in, it doesn’t matter what you sell or who you are in your day job. You will find that people naturally gravitate toward you, that people are constantly coming up to you and saying “Have we met before?” or “You look familiar.” In a sea of sameness, you will stand out. And, not surprisingly, you will have less effort selling whatever it is that you hawk in your business–even if it’s in a commodity market.

Creating a 7-Figure Business in Mere Months

I have consulted for so many people who are scared of commodity markets. When I started Whoosh Traffic, for instance, people seemed surprised that I was starting an SEO company. “Isn’t SEO dead?” they asked me. Au contraire…SEO is a thriving market with businesses willing to spend a lot of money on it.

Before I started Whoosh Traffic, I engaged other SEO services to see what gaps the market had. I found two major gaps. One, the market was full of individuals, often from other countries, who built links to your site and then sent you a list of the links they had built. These services were generally effective, but unwieldy. You had to pay the people via Paypal, usually weekly. You had to double-check all their work and ensure they weren’t building links on the same site over and over again, and confirm that all the links they built actually were linking to your site. They were inexpensive, but exasperating–managing them required a lot of work on your part.

The second gap was more interesting. We found quickly when we launched Whoosh Traffic that many of our customers didn’t know exactly which keywords to optimize for. We quickly adjusted and started offering a free 30-minute “keyword consult” to all of our new customers. In this consult, I personally walk through keyword analysis, showing our customers how to do their own analysis, what keywords they should go for, breaking down how their competition is doing SEO, and even how to redo their website to rank better in the search engines.

This analysis has proven immensely popular, and it’s also helped us gain feedback about the Whoosh Traffic website and user interface. We’re now working with a designer to redo our website to better address popular customer questions.

What Your Competition Can’t Do

This high-touch method is one thing most of our cheaper competition will never do, and it’s why I’ve been so insistent and vocal about doing these consultations myself, even though they can take up to 10 hours a week of my time. Yes, they could be easily outsourced, but I gain so much valuable insight into how our customers work that I’ve been happy and grateful to perform them.

There’s nothing more valuable for a business owner than talking to customers and understanding why they chose you (and why they almost didn’t choose you!) It’s that high-touch difference that allows you to grow a company quickly in any market. It’s exactly what I brought to the hosting industry. And it is why I am pleased to announce that after being open for only 5 months, Whoosh Traffic will hit 5 figures of revenue this month, and will be well into 6 figures of revenue in its first year. That’s with no outside investors and very little capital invested.

Whoosh Traffic could very well be a 7-figure business within 2 years of its opening. It has the potential to be a far larger company than my hosting company. (My hosting company didn’t hit 6 figures of annual revenue until the end of its third year!)

We’ve grown Whoosh Traffic so fast with no marketing so far…all that growth is from people who read this blog. I am extraordinarily grateful for my amazing community and how so many of you have chosen to engage our services…and I am amazed when I look back and realized that it all started with one story that made so many of you ask, “How did you do that?” or “Tell me more.”

That’s the power of being memorable.

Want to get started making money online? On Monday night, I’m co-hosting an online workshop with Chris Guthrie. Chris has generated over $1,000,000 in Amazon product sales, netting him about $90,000 a year, all from websites that you can set up too (no geekery required!) The online workshop is 100% free, and will show you exactly how to get started. You must sign up to attend: Sign up here now! Don’t miss this free workshop.

How Do All Those “Idiots” Make So Much Money? Does it drive you nuts that some idiot with a terrible product seems to be constantly making sales, when you know your product is better? What’s the difference between you and that “idiot”?

]]>http://www.erica.biz/2011/be-memorable/feed/96How I Gained An Additional $804 Every Month in Passive Income–with Just 30 Minutes of Workhttp://www.erica.biz/2010/passive-income/?utm_source=rss&utm_medium=rss&utm_campaign=passive-income
http://www.erica.biz/2010/passive-income/#commentsFri, 17 Dec 2010 01:58:53 +0000http://www.erica.biz/?p=3498After you read this post, you may think I’m incredibly stupid. Either that, or you will think I’m a genius. Perhaps both. There’s a valuable piece of online real estate that you’re probably not using to its fullest potential. And even though you may have heard this advice before, I bet you’re still not implementing […]

There’s a valuable piece of online real estate that you’re probably not using to its fullest potential. And even though you may have heard this advice before, I bet you’re still not implementing it.

I didn’t implement this tiny tweak for months, even though I knew about it. (That’s the stupid part.) But once I did, I gained $804/month in passive income.

Here’s my big “Duh” moment, and how you can easily put my stupidity/genius into action and gain some income as well, even if your site doesn’t get a lot of traffic. (By the way, I’m not selling anything here. But this tweak–I’m not going to lie–could make you more income than a lot of products you buy for $497 do.)

The Most Valuable Piece of Online Real Estate That You Aren’t Using

Let’s look at the sequence of a typical information product website:

On your home page, your web visitors put in their email addresses. Then, of course, they are redirected to your thank you page. Usually, your thank you page just has some text asking the person to click on the link in their email to confirm his/her email address.

So what do your visitors do? They close the window and go check their email.

And you’ve just missed the opportunity to make a quick sale with no effort on your part!

The Stupid Mistake That Cost Me Thousands of Dollars

This is exactly the mistake I was making with my Guest Post Secrets thank you page. Visitors come there who are interested in my product. Either they typed in “guest post” on Google, or they clicked on a banner or link on this blog. Then they opt in, indicating their further interest in my product.

Yet, my thank you page was the typical generic thank you page:

Knowing I could make an offer for the person to purchase Guest Post Secrets on my thank you page, I put “Redo Guest Post Secrets thank you page” on my to-do list. Then I procrastinated on it for months. There always seemed to be something more important to do.

Finally, last week, I resolved to get that to-do item done! And, with just 30 minutes of work, I had posted my salesletter as my thank-you page, with a one-time discount of $30 off Guest Post Secrets:

The next day, I woke up and lo and behold, there was another sale. And the next day, another.

I went from selling 4-5 copies a month of Guest Post Secrets to 4-5 copies a week.

Based on my calculations of the additional sales I’ll make from just this single tweak, I will pull in an additional $804 of completely passive income every month.

Had I known that, I would have made revamping my thank-you page a huge priority. My mistake is your gain. If you have people opting in for more information, make sure your thank-you page presents a related offer. Making it a one-time deal for a price they can’t always receive, as I did with Guest Post Secrets, is even better…it introduces scarcity and encourages them to buy right away.

Sometimes, the simplest changes to make can also be the most effective. Are you going to change your site based on the data shown here? Let me know in the comments!

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